Canada’s manufacturing shipment falls in October, economy likely to grow 2.2 pct in Q4

Canada’s manufacturing shipment dropped in October, reversing most of the gains recorded between August and September. Manufacturing sales declined 0.8 percent on a sequential basis. The fall in dollar shipments was due to both declining prices and demand, with the volume of shipments down by a heftier 1.7 percent in the month.

The decline in nominal shipments was greatly widespread throughout most sectors, with the biggest drivers being primary metals, petroleum and coal products and machinery, which dropped 2.4 percent, 1.7 percent and 2.5 percent respectively. Statistics Canada stated that some of the fall in petroleum and coal products was because of maintenance related shutdowns.

There were certain bright spots in the report, such as clothing manufacturing, aerospace and paper manufacturing. Significantly, unfilled orders rose 0.8 percent, implying that shipments might have rebounded since.

Out of 10 provinces, seven provinces recorded decline in shipments. Ontario, Quebec and Alberta led the declines as these provinces were most hit by the fall in transportation, petroleum, food and coal manufacturing.

In spite of the weak manufacturing figure, the Canadian economy is anticipated to expand by a comparatively healthy 2.2 percent in the December quarter, mainly because of factors outside of the export sector, said TD Economics in a research note. The economy is still waiting for a rotation towards exports, with much of the growth being tied to the housing market, said TD Economics.

“With the Federal Reserve in the U.S. continuing on a hiking cycle, and telegraphing a pick-up in the pace of rate hikes next year, the Canadian dollar is expected to depreciate a little more through the first half of 2017”, added TD Economics.